Luận văn Materials accounting in nissei electric Hanoi company - Hoàng Thị Lan Chi

PREFACE Vietnam is in the wide and deep integration in all aspects. In there, economic integration is always the most interesting since it has a great effect on the society. Together with opportunities of export expansion to international market, getting a lot of investments from foreign enterprises, groups as well as individuals, we also face many challenges from integration. At present, goods from international market overflow into Vietnam market freely and almost all of them have more competitive advantages. In addition, growing numbers of foreign enterprises and groups set up their branches or companies in Vietnam and supply to domestic market. They have better characteristics by far than Vietnam such as: technology, capital, manufacture experiences, etc. If we do not research promptly to improve for higher quality, lower cost of products…, definitely our market share will be reduced right in the domestic market. Recently, I have an opportunity of practicing in Nissei Electric Hanoi Company, studying their management system, enterprise culture and going into the details of materials accounting at accounting department. This is an export-processing company in the Nissei group, with 100% investment capital from Japan. Materials in Nissei Electric Hanoi Company are various and imported regularly for production. Materials play an important role and also make up a high cost in product price. Therefore, managing materials well is one of the most important issues of company. Nissei researched to create model management software has high integrated ability, together with confidential managers and a prompt working environment, they can manage company in general and materials in detail efficiently. They are new features that Vietnamese companies should follow and apply suitably to our companies. Thanks to the thesis “MATERIALS ACCOUNTING IN NISSEI ELECTRIC HANOI COMPANY”, I would like to present my opinion on materials accounting in Nissei and the model management system as well as Nissei culture thence I inferred some lessons for Vietnamese companies. The thesis includes three chapters: Chapter 1: General theory for materials accounting in productive enterprises. Chapter 2: Materials accounting in Nissei Electric Hanoi Company. Chapter 3: Suggestions to improve materials accounting in Nissei Electric Hanoi Company and lessons for Vietnamese companies. Because of the limitation of time and knowledge, mistakes are not avoided; I would like to receive contribution from readers for improvement of content as well as form for my thesis. Thanks a lot! Author Hoang Thi Lan Chi CHAPTER 1 GENERAL THEORY FOR MATERIALS ACCOUNTING IN PRODUCTION ENTERPRISES Materials and accounting issues in materials: Definition and characteristic of materials: Merchandise inventory is an important factor in determining the cost of goods sold for retailers and wholesalers. In a manufacturing enterprise, inventories are owned by the company and usually classified into three categories: finished goods, work in process and raw materials. In there, raw materials are a major component to take shape of product. Effective material management is frequently the key to successful business operations. Materials have two main characteristics: They participate in only one production cycle and their original forms are changed; Their values are transferred into products’ value in the production process. Classification of materials: Materials in production enterprises are various and plentiful. Each type of materials has a different role, use and feature. Therefore to manage materials effectively, businesses need to classify them. Depending on managing requirement, materials can be classified in different ways. Following are three ways to classify materials [1]: According to materials’ use: Raw materials: are main objects forming products and their value is transferred into products’ value entirely on production process. Sub-materials: are materials supporting for production process, combining with raw materials to increase quality and design of product, used to ensure that equipments run well or supporting for technical and management demand. Fuels: are used for production such as coal, oil, etc... In essence, fuels are sub-materials which are separated to manage and used accounts more conveniently because of their important role. Spare-parts: are used for replacement and repair of machinery, equipment, etc... Capital construction equipment: includes construction parts, fit and non-fit equipment used in capital construction, industry Other materials: are materials not grouped into the above types. They mainly are scraps taking back from the production process or liquidation of fixed tangible assets. By this classification way, businesses can know which type of materials is needed to be managed more strictly, especially materials are used directly for production, materials have high values or materials are leaked easily. According to suppliers: Home-made materials: are materials created by enterprises themselves to support for production demands. Materials provided from outside: are materials which enterprises buy from the domestic market or import from foreign countries. Other materials: are materials formed from presentation or from joint-venture partners’ contribution... Managing materials according to their sources is also very important to companies. For example, with an exporting-importing enterprise, they usually classify materials in two types according two main ways of importing materials: import from domestic and import from foreign countries to manage. According to purpose of using : Materials directly used for manufacturing products. Materials used for other demands like general manufacture, selling or enterprise management. According to this classification, business can arrange sections to manage materials for difference purpose of using, ensure supplying materials timely… Measurement of materials: Determining material cost is an important task of materials accounting. They use a monetary ruler to express the value of materials according to given principles. These principles are assigned in the provision No 04 of VAS 02 about materials which is promulgated along with Decision 149/2001 of the Ministry of Finance on 31st December 2001: “Materials are valued according to their original prices. Where the net realizable value is lower than the original price, they must be valued according to the net realizable value”. In there: The original price of inventories consists of the purchasing cost, processing cost and other directly-related costs incurred for having the inventories stored in the present place and conditions; The net realizable value is estimated price of inventories in the normal production cycle minus (-) estimated cost to finish product and estimated cost need to consume them. Therefore, in accordance with Inventory accounting standard, materials in enterprises are determined according to real price. Determine cost of stored material: Determining cost of stored materials conform to cost price principle. Enterprises store materials from many sources. Depending on every source, the real value of materials is defined differently [7]. Materials are provided from outside: Real value of materials = Price on bill + Purchasing cost + Non-refundable taxes - Trade discounts, price reductions In there: Purchasing cost includes: cost of transportation, loading and unloading, loss in norm. Non-refundable taxes such as custom tax, VAT… Materials are provided by hiring people to process. Real value of materials = Real value of material used + Hiring cost + Transportation cost (if any) Materials are provided by enterprises themselves: Real value of materials = Cost price of materials used + Transportation cost (if any) Materials are provided by issuing: Real value of materials = Price according to receiving report Materials are provided from join-venture partners’ contribution: Real value of materials = Value of capital due to join-venture assembly defines Materials are provided by presenting: Real value of materials = Market price at receiving time Wasted materials are taken back from production: Real value of materials = Reusing price or selling price of materials Determine cost of materials used: Choosing the determine cost of materials used method is based on the characteristics of each business regarding quantity of materials; time of storing and using materials; ability of accountant, stockman and material condition. Provision No 13 of VAS 02, there are four methods to determine cost of materials used: Specific identification method: To this method, costs of materials used from which lot will be defined follow the price of that lot. This method requires that each unit on hand be identified with a specific purchase invoice. To do this, enterprise must use some form of identification such as serial numbers, or stock tags, or bar codes containing the cost recorded in some appropriate coding system, which are attached to the item. Application of the specific identification method is a greater possibility when using a computerized inventory system, where the cost of each item may be identified in the bar code for that item. When the item is used, the cost of that item is readily obtained from the computer’s reading of the bar code. This method is applied to enterprises having a few good items or stable and identifiable good items. Advantages: define exactly cost of materials used, certain cost is suitable for certain revenue. Disadvantages: when business has a lot of material items, materials move continuously, controlling materials will be very difficult and detail materials accounting will be very complex. For most entities, this method is not practical and is too costly to apply. Average method: the cost of materials used is equal to quantity of materials used multiply with average unit price. The average unit price can be defined according to two ways below: Weighted average method: under this method, an average cost per unit is calculated by dividing the total cost of beginning materials and materials stored in period by the total number of units at the beginning and stored in period. Average unit price = Cost of beginning materials + Materials stored in period Quantity of beginning materials + quantity of materials stored in period This method is suitable for enterprises having a few material items but material movement is high; and is used with synthetic accounting by periodic inventory system. Advantages: simple, possible to cut down materials accounting works, not depending on materials movement. Disadvantages: materials accounting is driven into the late period, therefore it affects the progress of other accounting. Moving average method: a new average cost per unit is calculated after each purchase. The average is called a moving average because a new weighted average cost is calculated after each purchase rather than simply calculating a weighted average at the end of the period. The moving average cost, calculated after a purchase, is used to calculate the cost of materials on hand until additional units are acquired at a different unit price. The moving average cost of materials is calculated as follows: Uninterrupted Average unit price = Materials value before n storing time + Materials value at n storing time Quantity of materials before n storing time + Quantity of materials at n storing time This method should be applied in enterprise which has few types of materials and where materials movement is not high; and is used with synthetic accounting by perpetual inventory system. Advantages: gains the most accurate cost of materials used when the accountant uses this method; reflects fluctuation of price timely; determination cost of materials is implemented regularly. Disadvantages: accounting work is numerous and complex. This method is suitable for enterprises using accounting software only. First in first out (FIFO): The FIFO method assumes that the earliest materials purchased are the first to be used. FIFO is widely used because it is easy to apply. FIFO often parallels the actual physical flow of merchandise because it generally is good business management to sell the oldest units first [12]. This method is suitable for inflationary period and applied for enterprises which have a few of materials items and movement of materials is not high. Advantages: accountants can define cost of materials used timely. This method supplies a logical estimation on material value at the end of the period. Disadvantages: current cost is not suitable current revenue. The current revenue achieved since cost of materials in detail and inventories in general stored previously. Therefore, the business cost of an enterprise does not react timely with market prices of materials. Last in first out (LIFO): Under the LIFO method, the cost of last unit purchased is assumed to be the cost of first unit sold. The cost of the most recent purchases is transferred to cost of materials used. The cost of the ending materials consists of the cost of the earliest purchase [12]. This method is suitable in deflationary periods and applied to enterprises which have a few of materials items and movement of materials is not high. Advantages: current revenue is suitable current cost. Costs of enterprises’ products react timely with market prices of materials. Therefore, the information about enterprises becomes more reliable. Disadvantages: reduce enterprise’s net income in deflation periods and material values on the balance sheet can be smaller than their real value. The selection of a cost method to use for a particular type of inventory depends on many factors such as the effect that each method has on the entity’s financial statement, Income tax laws, information needs for managers and financial statement users, the clerical cost of applying a costing method, and requirements of accounting standards. In practice, more than one of the methods may be considered appropriate in accounting for the same type of inventory. That is, accounting standards do not prescribe the use of a specific costing method as being “best” for a particular set of inventory conditions. It is up to managers and the accountant to decide which method provides the most useful information to financial statement users. However, when using materials, accountant must calculate, determine real cost of materials used according to method registered and must ensure consistence in a finance year [13]. Managing requirement and accounting duty for materials: Managing requirement for materials: In our economy, profit becomes the last aim of business. The inverse ratio relation between cost and profit is more and more interested in. So enterprises always find the way to minimize production cost, reduce cost price. Therefore, with the ratio is about 60-70% in total cost, materials must be managed more effectively. If business uses materials economically and suitably, they will make products of high quality; in addition, the cost price of products will be reduced. The business will have more advantages in the market. More scientific management of materials more economical effect businesses gains. These roles require materials management to be close in all stages from purchasing, reserving and maintaining to using them. In the purchasing stage: enterprises usually buy materials to satisfy timely for production process and other demands. In this stage, materials must be managed closely on quantity, specification, sort and price. In the reserve and maintenance stage: to keep production process continuously, enterprise must reserve materials sufficiently; however, avoid storing materials exceeding the required level because it will lead to capital stagnant; maintaining materials according to their physicochemical properties. In the using stage: enterprises must determine cost of materials in products sufficiently, correctly, timely. Therefore, in this stage, business must record and reflect using materials for production process, ensure using them effectively. Accounting duty for materials: To meet managing requirement, materials accounting must include the following tasks and functions: Organize the voucher system: obey rules of form, time of making vouchers, rotation of vouchers, reserve and maintenance of vouchers of the Ministry of Finance. Rotation of vouchers must ensure that supply information sufficiently to materials managers, safety for vouchers; record into accounting books sufficiently, timely; avoid tautology and should minimize the rotation time of vouchers. Accounts system: ensure the rules of unity and accommodation. The general accounts of business are due to accounting regulation and the detail accounts are due to business’s characteristic. Organize accounting books system of a business must ensure two rules: unity and accommodation. Business must apply all obligatory books stipulated by the Ministry of Finance and create books supporting for material management to supply information sufficiently and timely. Reports on materials need to be created according to accounting regulations on time and transported to the functional section managing materials. Materials accounting: Detail accounting for materials: Materials voucher system in enterprises is applied according to accounting regulation promulgated on Decision 15/2006 of the Ministry of Finance on the 20th March 2006. Materials voucher system consists of: Storing materials voucher (Form 01 – VT); Using materials voucher (Form 02 – VT); Inventories test report (Form 03 – VT); Remaining materials at the end of period report (Form 04 – VT); Stock-taking report (Form 05 – VT); VAT invoice (Form GTKT - 3LL) The process of making and rotating materials vouchers is taken as shown by this diagram: Business Planning Section Reserved Director, Chief Accountant Materials Accountant Stockman Supplying section Research demand of materials Sign contract/ approve using stock Record materials books Store materials, use materials Create storing/ using voucher Diagram 1: Rotation of materials vouchers Detail accounting for materials is monitoring and recording the fluctuation of storing, using and remaining of each material in production process to supply detail information for managing every material item. Detail accounting for materials must ensure controllable storing, using and remaining situation in quantity and value of each material item; synthesize the information above according to each warehouse, stand and field. Enterprises can use one of the three methods below to account materials in details: Parallel inventory cards method; Balance books recording method; Rotation collation books recording method. The thesis imitates three methods by diagrams and presents their advantages, disadvantages and applying conditions. Note: Daily recording Periodically recording Collating daily Collating periodically Parallel inventory cards method: Represent this method according to the diagram below: Using inventory voucher Storing inventory voucher General accounting book Storing-Using-Remaining report Detail accounting book Stock card Diagram 2: Parallel inventory cards method Advantages: This method is simple in recording, controlling, collating and supply information on storing, using and remaining of materials item timely, correctly. Disadvantages: recording by both stockman and accountant so taking a lot of time and effort. This method is suitable to apply for businesses using accounting software and business with a few material items. Balance books recording method: Represent this method according to the diagram below: General accounting book Storing-Using-Remaining report Balance books Voucher (1) Transferring note Stock card Storing inventory voucher (1) Voucher (2) Transferring note Using inventory voucher (2) Diagram 3: Balance books recording method Advantages: avoid recording many times, works are arranged for all period so not accumulated to the late period. Disadvantages: have much difficulty in controlling, collating and detecting mistakes. This method is suitable to apply for businesses which have a lot of materials items and materials movement is high; accountant and stockman has a good ability. Rotation collation books recording method: Represent this method according to the diagram below: General accounting book List of inventory used Rotation collation book List of inventory stored Stock card Using inventory voucher Storing inventory voucher  Diagram 4: Rotation collation books recording method Advantages: makes fewer accounting books than parallel cards method, reducing accountants’ recording work. Disadvantages: controlling, collation and mistake detection meet with much difficulty. Works are accumulated to the late period so it affects the progress of other accounting. This method is suitable to apply for businesses have a lot of material items but materials movement is not high; organizing materials accountant to follow storing and using materials everyday is unimplemented. Synthetic accounting for materials: There are two methods to synthetic accounting for materials. Periodic inventory system; Perpetual inventory system. Periodic inventory system: When the periodic inventory system is used, the cost of materials purchased during the period is recorded in the Purchase account. Throughout the period, the balance of the Materials account presents the cost of materials on hand at the beginning of the period. To determine the cost of the ending materials, the units on hand at the end of the period must be counted and evaluated. The cost of ending materials is then reported usually as apart of current asset in the balance sheet. Due to the result of stocktaking at the end of period, accountants can reflect the value of materials remaining on the general accounting book and cost of materials using during the period. Cost of materials used = Cost of beginning materials + Cost of materials stored in the period - Cost of ending materials All movements of materials are not reflected on the Materials account, cost of materials stored is reflected on the Purchasing account. This method is suitable for enterprises with various categories of materials, low value and often used. The advantage of the periodic materials method is simple and reduces greatly the amount of daily accounting work. However, the accuracy of materials used during the period is based on how well manager performs their job in the warehouse and at the counter. Account used: Purchase account: 611. Account No 611 is used in order to reflect cost of materials stored and used during the period. Structure: Purchase account – 611 Debit Credit Transfer cost of beginning materials Cost of materials stored in the period Transfer cost of ending materials Transfer cost of materials used in the period Cost of materials returned to suppliers Account No 611 has no ending balance and can be divided into two following sub-account. Account No 6111: Purchase materials Account No 6112: Purchase goods Materials account - 152 and Goods in transit account - 151 Structure: Purchase account – 611 (Goods in transit account – 151) Debit Credit Cost of beginning materials (beginning materials in transit Transfer cost of beginning materials (beginning materials in transit) Balance: Cost of ending materials (ending materials in transit) Accounting method:  Diagram 5: Accounting method according to periodic inventory system (1) Transfer cost of ending materials (2) Purchase materials from domestic suppliers (3) Purchase materials from foreign suppliers (4) Receive materials provided by the enterprise itself (5) Receive materials from Joint-venture partners’ contribution (6) Receive materials from the enterprise’s joint-venture contribution (7) Receive materials by presenting (8) Move unused materials to warehouse (9) Use materials for production or administration (10) Receive trade discount from suppliers (11) Return materials purchased or materials rebates from suppliers (12) Use materials for construction or extra-ordinary repair of fixed assets (13) Use materials for self-production (14) Use materials for contribution. (15) Transfer the beginning balance Perpetual inventory system: When perpetual inventory system is used, although the materials on hand are available in the materials account at all times, a physical stock-take is still taken at least once a year to verify the balance recorded in the accounting record. In this way, any discrepancies from loss, theft or deterioration can be accounted for. Applying this method business can follow continuously all movements of materials on the accounting books, determine cost of materials stored, used or remained at any time. This method is suitable for enterprises have materials with high value. Account used: Materials account: 152 Account No 152 is used in order to control remaining cost and movement of materials according to real price. Structure: Materials account – 152 Debit Credit Cost of materials stored by providing from outside, inside, presentation or other sources Cost of redundant materials detected from stocktaking. Cost of materials used for production, sale, etc.. Cost of materials rebated, discount or return to suppliers. Cost of deficient materials detected from stocktaking Balance: Cost of remaining materials at the end of period. Account No 152 can be divided into following sub-accounts follow to each type of materials depending on managing requirement of enterprise. According to materials’ use, they can be divided into five following sub- accounts: Account No 1521: Raw materials Account No 15222: Sub-materials Account No 15223: Fuels Account No 15224: Spare parts Account No 15228: Other materials Materials in transit account: 151 Account No 151 is used in order to reflect cost of materials that business bought or accepted to pay for suppliers but not yet stored at the end of period. Structure: Materials in transit account – 151 Debit Credit Cost of materials in transit Cost of materials in transit were stored or transferred to other sections used. Balance: Cost of materials in transit have not stored at the end of period. Besides, synthetic accounting for materials uses some other accounts involved such as: 111, 112, 133, 141, 331, 515… Accounting method: Accounting method for transactions related to materials according to perpetual inventory system is presented in the diagram 6 (when business applies the VAT deduction method)  Diagram 6: Accounting method according to perpetual inventory system Purchase materials from domestic suppliers. Purchase materials from foreign suppliers. Receive materials produced by the enterprise itself. Receive materials from joint-venture partners’ contribution. Receive materials from the enterprise’s joint-venture contribution Receive materials in transit last month. Receive materials from presentation Move unused materials to warehouse. Use materials for production or administration. (10)Receive trade discount, purchase returns or purchase rebates from suppliers. (11) Use materials for construction or extra-ordinary repair of fixed assets. (12) Use materials for self-production. (13) Use materials for contribution. (14) Use materials for consignment or directly consume. Accounting for stock taking and revaluating of materials: Inventory management has been researched and developed for many years, and stocktaking management is an important part of inventory management. Many companies consider stocktaking an aid to stock management, allowing forecasting, planning and budgeting to be as easy as possible. Enterprises often inventory materials to define the remains of each material item in warehouse; then collate with data on accounting books, specify the differences and the treatments. Depending on enterprise’s condition and managing requirement, enterprise can take stock of the whole of materials, parts of materials or by choosing samples. Stock-taking can be implemented at the end of months, quarters, years or at anytime according to management requirement and applied in both periodic and perpetual inventory systems of enterprise. However with enterprise applying periodic materials system, inventory at the end of a period is obligatory. These enterprises usually have a lot of types of material; therefore, inventory must be planned carefully and implemented by many involved sections in company to have an exact result on amount of materials at the end of period. Revaluation is carried out in some following cases: Being required by the Government. Ownership being transferred. Other cases such as materials being contributed to joint-venture or corporate company, the price of materials having changed greatly… Journal entries for the stocktaking and revaluation materials are presented in the diagram 7:  Diagram 7: Taking stock of materials and revaluation of materials When enterprise has solutions: Debit Acc 111, 112, 334, 3388: personals’ compensationDebit Acc 632: enterprise compensates for the damage Credit Acc 3381: cost of deficient materials is pending. Surplus materials are defined belong to enterprise:  Debit Acc 152: cost of surplus materials belong to enterprise Credit Acc 711: cost of surplus materials belong to enterprise After definition, if surplus materials are not belong to enterprise and must return to other business, accountant records singly to Acc 002; if enterprise buy back these materials, they must report to suppliers and implement these entries:  Debit Acc 152: cost of surplus materials buy back Credit Acc 338: cost of surplus materials buy back Provision for decline in materials: At the end of the period, if the net realizable value of materials is less than the historical cost value of materials, enterprises must provide against this decline. The materials provision is used to compensate for the decline due to the reduction in the value of materials as well as to give a true picture about the company assets on the financial statement at the late year. Provision for decline in materials is the difference between the historical cost of materials and the net realizable value of materials. Provision for decline in materials is defined for each materials item, then synthesizes them to provision for materials. Provision level for decline in each material item = Amount of materials declined at the late year X Historical cost of materials - Net realizable value of materials at the end of year Total amount of provision for decline in materials = S Provision level for decline in each material item Account used: Provision for decline in inventory Account: 159 This account is to record the setting up and using the provision for decline in inventory. Account No 159 – Provision for decline in materials Materials provision returned Materials provision counted towards the enterprises’ cost of goods sold Balance: Current materials provision Accounting for provision for decline in materials:  Diagram 8: Provision for decline in materials Forms of accounting books: According to the Decision 15/QD-BTC on the 20th of March 2006 of the Ministry of Finance, enterprises apply one of the five forms of accounting books below: General journal Ledger – Journal General journal voucher Voucher – Journal Accounting by software (is presented in the next section 1.2.6) Each form of accounting books follows concrete regulations on quantity, structure, form of books, rotation, recording method and relationship between accounting books. Enterprises must refer to the scale, production and business characters, managing requirement, accountant ability and the conditions of enterprise to choose a suitable form of accounting books. General Journal accounting form: The main feature of the general journal accounting form is all transactions must be recorded in journals, focusing on general journals, following the time and content of transactions. Then, the data in journals is transferred to ledgers according to transactions. The general journal accounting form includes books below: General journal, Special journal; Ledger; Detail accounting books and cards. Ledger - Journal accounting form: The main feature of the Ledger - Journal accounting form is all transactions must be recorded in Ledger – Journal according to the time and content of transactions. Due to list of vouchers, accountant synthesizes them to record to Ledger – Journal. The Ledger - Journal accounting form includes books below: Ledger - Journal; Detail accounting books and cards. General journal voucher accounting form: The main feature of the general journal voucher accounting form: due to “general journal voucher” or list of vouchers, accountant synthesizes them to record to synthetic accounting book according to: Time on the general journal voucher registered book; Content on the ledgers. The general journal voucher accounting form includes books below: General journal voucher; General journal voucher registered book; Ledgers; Detail accounting books and cards. Voucher – Journal accounting books: The main feature of the voucher journal accounting form: Collect and systematize transactions according to credit accounts combine with analyzing those transactions according to debit corresponding accounts. Combine recording transactions follow to the time with systematizing those transactions follow to the economic content (account). Co-ordinate synthetic and detail accounting in the same accounting book and the same recording process. Use forms printed the corresponding accounts, norms of financial, economic management and financial statements. The Voucher - Journal accounting form includes books below: Voucher - Journal; Lists; Ledgers; Detail accounting books and cards. Accounting software for materials accounting: Accounting software is application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, inventory, payroll, and trial balance. It functions as an accounting information system. As the business is growing and expanding the need of the business is also growing with the expansions. The accounting software has become a need for the business in order to maintain and sustain in the business for the longer period of time. There are many advantages of the accounting software for the business. First of all it helps the users to save their precious time when they use special accounting software. The second, it provides a smooth and systematical process of managing day to day records of the business so that the business can easily handle. It decreases the complications of the business when the proper use of accounting software is in process. There are many benefits of using accounting software. It helps the auditors to conduct the audit more quickly and easily. So the accountants are unable to frauds in the accounting system and this helps the business to monitor all the activities of the business. However, to get better results from applying software in accounting, enterprises need to be good at management the original document system and the applied accounting software also has to be flexible with each enterprise’s condition. In addition, the accounting software needs to be complied with current regulations and principles of the State. Accountant’s responsibility in using the accounting software: In order to organize materials accounting in enterprise to satisfy fully and quickly the demands for materials information, accountants need to carry out their duties as follows: Encoding each materials Organize involved documents to input data into the system. Building up the voucher system and account system Organizing accounting book system Nowadays, many foreign companies and some Vietnamese companies are applying a model management system for whole company including accounting works. This system has being mentioned a lot in newspapers as well as conferences as ERP system (Enterprise Resources Planning system). ERP has many advantages not only for accounting but also for company management. Nissei Electric Company is one of the companies applying ERP system; therefore, in two Chapters after, the thesis presents more clearly about action and advantages of ERP and lessons for Vietnamese companies in deploying this management system. In summary, in chapter 1, I present some issues about characteristic and position of materials, some ways to classify materials, measurement of materials, managing requirement and accounting duty for materials. The main purpose of this part is to analyze deeply some issues on detail accounting and synthetic accounting of materials… The content of chapter 1 will be a theoretically basis for studying materials accounting materials in details and accounting system in general as well as making a proposal for development of Nissei Electric Hanoi Co.,Ltd. CHAPTER 2 MATERIALS ACCOUNTING IN NISSEI ELECTRIC HANOI COMPANY Nissei group and Nissei Electric Hanoi Co.,Ltd: Nissei Electric Hanoi Co.,Ltd is a company of Nissei group. To help you have an overview of Nissei Electric Hanoi, the thesis would like to represents about Nissei group the first. Nissei group: Forerunner of Nissei group is Nissei Electric Co.,Ltd (N.E.J). N.E.J was found on 26th May 1969, their head office is at 1509 Okubo-cho, Hamamatsu-city, Shizuoka-pref.432-8006 Japan with the legal capital is 1,776.66 million yen (approximate 15,545,775 USD). N.E.J’s establishment pertains to era’s necessaries, era of development of science and technology, model machineries and equipments. With their potentiality and human resources, N.E.J has been developing and controlling the world market gradually. Lines of business of N.E.J are Sales, Production and R&D: Silicone rubber insulated wire, cable & tubing; Fluorocarbon polymer insulated wire, cable & tubing; Optical cable, bundles & variations; Silicone rubber extruded products-packing; rubber conductors & EMI parts, etc; Heating element wire & heating assembly units; Units & parts for OA equipments; Related products for communication equipments, etc... While many companies move their production bases to "world factory" China or the East Asia region, Nissei reconsiders "Japan's role" and places the development block in Japan. They always think of customer satisfaction so that they maintain the thorough education of employees in any region. They have been achieving "cost reduction" and "reduced delivery time". Since they make Japan as their home base for research, develop technologies and eliminating production bottleneck, and then they move their production overseas, they can make the best use of the regional advantages and promote the global-scale development. Development history: 1969 May. Established the company, capitalized at 10 million yen 1970 Sep. Started to produce glass-braid tubing 1971 May. Started to produce silicone rubber electric wire 　　　  1971 Nov. Registered as a production establishment based on Section 3 of Electrical Appliance and Material Control law 1973 Apr. Founded Tatsuyama Factory 1974 Dec. Obtained UL standards 1976 Oct. Started to produce fluorocarbon electric wires 1977 Aug. Obtained CSA standards 1980 Apr. Founded Ryuyo Factory 1982 May. Started to produce silicone rollers 　　　 1982 Jul. Started to produce high-frequency coax cable 1983 Nov. Started to produce fluoric rubber electric wires 　　　 1983 Dec. Started to produce fluorocarbon tubing 　　　 1983 Jun. Started to produce optical fiber components 1985 Jun. Started to produce fluorocarbon rolls 1989 Dec. Started to produce fixing units 1993 Dec. Estabilished NISSEI ELECTRIC (ZHONGSHAN) CO., LTD. 1995 Jan. Estabilished NISSEI ELECTRIC (HONG KONG) CO., LTD. 1995 Dec. Started to produce multi-component optical fiber 1996 Nov. Obtained the ISO 9001 certification 1999 Sep. Established NISSEI ELECTRIC VIETNAM CO., LTD. 2000 May. Established the customer service center 2000 Nov. Obtained the ISO 14001 certification 2002 Apr. Established NISSEI ELECTRIC (SHANGHAI) TRADING CO., LTD 2003 Jun. Established NISSEI ELECTRIC (KUNSHAN) CO., LTD. 2006 Jan. Established NISSEI ELECTRIC (HANOI) CO., LTD. Nissei uses software BPCS to manage whole group. BPCS is an acronym for Business Planning and Control System, BPCS was developed by System Software Associates (SSA), BPCS is used to control the operations of manufacturing companies and is in the category of Enterprise Resource Planning (ERP) software. BPCS of Nissei runs on the IBM system. This diagram describes functions of BPCS Application suite: Manufacturing Data management Inventory Shop floor control Master scheduling Capacity planning Laboratory management Just in time Quality control Repetitive manufacturing Advance process Performance measurement Materials requirement planning (MRP) Forecasting Master scheduling Simulations Planner’s assistant Capacity planning MRP Distribution resource planning Inventory Purchasing Billing Sale analysis Promotions and deals Performance measurement Customer order processing Cost accounting Account payable Account receivable Billing General ledger Cash management Multiple currencies Currency translation Financial assistant Fixed assets Payroll Business molding Data mining Planning Financial Manufacturing Distribution BPCS  Diagram 2.1: Functions of BPCS software They researched to design this software very carefully to make it suitable for each company in the group before operating. With this model management system and their endeavor, their products are various and professional. Nissei has been developing techniques for a wide range of areas and introducing a number of products. They read the trend of the times and have all the time to try out new opportunities to expand to become the top firm in the field by acquiring innovative ideas and advanced technologies. Besides, they flexibly meet the diversified needs of customers. Nissei has been leading to a heightening in response time and cost-effectiveness. They continue to have an international perspective and redouble their efforts to make themselves necessary to the society in the 21st century. Therefore, it is not surprising if you see Nissei’s slogan: DO OUR BEST, SOMETHING ONLY WE CAN DO And their guideline is: GENERATE IN ASIA - DISTRIBUTE TO THE WORLD Nissei Electric Hanoi Company: The foundation and development process of the company: Basic information: Company name: Electric Hanoi Co.,Ltd (N.E.H) Established Date: January 03, 2006 Address: Lot I-3 Thang Long Industry Park, Dong Anh, Hanoi Telephone: 04.9550045 Fax: 04.9550046 Form of enterprise: Exporting - processing enterprise Contributory capital: 100% foreign-invested capital from Japan Legal capital: 30.000.000 USD Total capital: 100.000.000 USD Number of employee: 3.200 people (until December 30, 2007) Functions and tasks: Manufactures and supplies products to Canon Que Vo, Canon Thang Long, Brother industry company and companies in Nissei group; always tries to improve for higher product quality with on-time delivery at competitive price; Updates model technology for product; Imports materials, spare parts and accessories used for manufacture; Contributes and maintains enterprise culture; creates the best environment for the company and the individual (training for new comers, training on the job, training management level, etc). One of the most necessary activities for company is “5S activities” for working environment protection. Some great landmarks of N.E.H: 2006 Jan Received the Investment license and started the 1st and 2nd factory construction 2006 Sep The legal capital increased to 12,000,000 USD 2006 Oct Started the 1st factory operation 2006 Dec The legal capital increased to 16,000,000 USD 2007 Feb Recognized ISO 14001:2004 Certificated by TUV 2007 Apr Recognized ISO 9001:2000 Certificated by TUV 2007 Jun Started the 2nd factory operation 2007 Jul The legal capital increased to 30,000,000 USD 2008 Jan Started the 3rd factory operation N.E.H deals in various products so that they can meet their customers’ demand in a wide range of industry. The characteristic of product organization N.E.H’s products can be divided into three types: HIFLON, LIKAL and LICOM HIFLON is a generic name of Nissei fluorocarbon polymer insulated products. Since HIFLON is excellent at thermal resistance (withstands temperatures of from -200 to 250 degrees centigrade) and chemical resistance, it is often used in diverse fields such as industrial equipments, OA equipments, etc. Products of HIFLON are: Insulated electric wire, Coaxial cable, Piping tubing: hose, Heat shrinking tubing, Roller tube for copying machines or printers; Antenna for wireless LAN, Fluid level sensor, Medical tubing. LIKAL is a generic name of Nissei silicone rubber insulated products. LIKAL is the synthetic rubber which has outstanding stability and withstands temperatures from -60 to 200 degrees centigrade. Since LIKAL is excellent at compression set and weather resistant, it is often used for products, which must be reliable for a prolonged period, such as automobile equipments, home electric appliances, or moldings of building materials, etc. Products of LIKAL are: Insulated electric wire, Shielded cable, Piping tubing: hose, Heat shrinking tubing, Bladed tubing, Roller tube for copying machines or printers, Heaters components, Extrusive molding. LICOM is a trademark of Nissei optical fiber products. Commencing with silica glass fiber products, various products are made of compound glass fiber or plastic fiber. Also, by using of these fibers, N.E.H produces light sensors, light guides for illuminations, various light source boxes, etc... Products of LICOM are: Light guide, Sensor fiber, Light source box, Light compound communication cable. Among these products, Antenna, a product of HIFLON line, is the one of main products of N.E.H. Antenna is one of the products brought back the highest revenue to N.E.H. With specialization in electrical equipments, N.E.H has been continuously developing the quality of antenna. It is used in many products such as: mobile, PC, automobile, etc… Antenna manufacturing workshop is divided in many small sections specialize in different stages of manufacturing process. Code of this shop is 9662. After surveying the Antenna workshop, manufacturing process can be described as follows: Cables Cut (2-3mm) Pull off the outer sheath Dip in solder Pull off the inner sheath Dip in solder Bankin Cut Treated Cables Stick to Cables had bankin Stick shrinkable tube Weld, Clean and Glue label Press bankin Press ABS (electric isulated block) Control connector Stick protected tube and Lot No Object Process Effect Antenna  Diagram 2.2: Antenna manufacturing process To manufacture antenna, N.E.H implements fourteen main steps. It always determines allowed rate of waste and the deadline for every mass-production. N.E.H produces many kinds of antenna depending on customers’ orders. The characteristic of management of the company: Due to a large scale of production, large number of labors, lots of departments, workshops and kinds of products, arranging sections suitably in N.E.H is very necessary. Being 100% foreign capital company with the model managing system by Japanese, N.E.H applies ERP system, for managing the whole company. Their BPCS software is designed suitably to characteristic of the company and integrates data for the whole company. All departments from warehouse, shops to offices in company use this software for necessary information but not all users can control or repair it. In fact, it is usually called decentralization system. BPCS has many special automatic functions such as automatically determining suitable type and quantity of materials for production and transforming data to involved sections. Each department has a private code and users have their own passwords to enter BPCS. After recruitment, employee must be trained carefully to use this system. BPCS links all sections together. Therefore, they can reduce many phases and save time as well as effort. Managers can control all data of sections on the system, detect faults from users or errors of the system and give methods to deal with these problems before it happens. BPCS software is like the life-line of N.E.H, it helps the company operating fluently and effectively. In parts below, BPCS will be introduced more detailed in accounting department. With this management software, all works must be done in accordance with the process and obligate to all staves in company to manage efficiently. This is the structure of N.E.H. General affairs department Accounting IT department Exporting-Importing Production Managing Purchase Department Engineering department Quality control Information engineering Production department 4 Production department 1 Production department 5 Production department 2 Production department 6 Production department 7 Production engineering DGD GD DGD GD Section Manager Section Manager Section Manager  Diagram 2.3: Structure of N.E.H General Director (GD): the authorized respective of the company. Decides all issues related to daily activities of the Company base on deputy general directors’ opinion even staffs’ and labors’ reflection. The GD usually keeps in touch with other general directors in Nissei group. GD monitors directly Export - Import, Production Managing and Purchase - Sale Department. Deputy General Director (DGD): works as the counselor of the GD. DGD monitors directly General Affair, Accounting and IT Department. Section Manager: there are three section heads monitor directly Engineering, Production and Production Engineering section. They plan, coordinate directly and supervise actions of the sections in general. General affairs department: offers a safe and healthy working environment and chances of learning by training both in and outside of the company as well as training in Japan, provides sufficient welfare and prompt salary; duties on recruitment, personnel management, updating new law policy and other administrative works. Accounting department: collects and records all economic transactions involved, draws financial statements monthly and supplies accounting information for managers, etc… IT department: is in large of installing, repairing and settling information and technology problems for the company like installing computer and other machinery ensuring to work fluently. Export-import department: implement import and export procedures timely and legally. Production managing department: controls the quantity of products according to orders on the system and the completing level those orders of workshops; gives solutions timely if necessary; deal with the differences on quantity of materials, goods…between invoice and reality or the system. Purchase department: contacts to customers and suppliers; implements purchasing process suitably and legally. Engineering section: make samples according to customers’ design and experiments with new products that are requested from N.E.J engineering Dept; test samples and appraise trial manufacture result before mass production; improve production process and educate for machine operators. They must be good at Japanese because they often contact to Japanese experts. Production section: manages and controls production of workshops, quality and quantity of products. Production engineering: deals with problems occurred in the production process. The characteristic of accounting system of N.E.H: Structure of accounting system of N.E.H: Due to the requirement of the operative organization and the managing ability, N.E.H accounting system is organized according to the concentration form that has only one central accounting department. Chief accountant - - General accountant Accountant of receivable amounts and revenues Accountant of payable, tangible fixed assets and inventories Accountant of bank deposit Cashier Accountant of salary and amounts withhold from salary  Diagram 2.4: Structure of the accounting department At present, the accounting department of N.E.H includes: Chief accountant and general accountant: supplies directly all accounting information to the director, gives suggestions of developmental strategy of the company such as mobilizing capital policy, investing policy; assumes general responsibility for information supplied by the accounting department as well as is the general accountant who synthesizes data, assemble costs… to make financial statements. Accountant for receivable amounts and revenue (AR): monitors and records all receivable amounts in detail, ensures fully receiving debts; records timely every amount of revenue and makes detailed revenue reports; Accountant for payable amounts, fixed assets and inventories (AP): monitors and records all payable amounts in detail; records increasing and reducing of fixed assets timely as well as reflects their depreciation; records and monitors store and using materials and tool quantity, adjusts their quantity if there is any difference between invoice and practice, etc.. Accountant for bank deposit: determines payable amounts become due and implements transfer procedures for suppliers as well as customers (if any). Accountant for bank deposit, salary and amounts withhold from employee’s salary: gives salary to employees through accounts basing on the basic salary and the actual salary, calculates social and health insurance amount as well as trade union fee, tabulates Board of salary settlement and checks Board of timekeeping Cashier: pays cash to the domestic suppliers basing on approved payable vouchers, daily balances the accounts everyday; makes the report of balance of the budget at the end of day, makes the report of cash balance at the end of month. The accounting policy: Fiscal year starts on Jan 1st and ends on Dec 31st. The accounting period is month. Unit currency: USD N.E.H is an exporting-processing enterprise in the industry zone so it applies VAT rate: 0% (according to the circular 32/2007/BTC-TT); they must not pay for custom duties (according to the degree 149/2005/ND-CP) Tangible fixed assets accounting method: Evaluation principle: according to historical cost and depreciation amount; Depreciation method: Straight-line method. Inventories accounting method: Applying periodic raw materials system; Applying perpetual tools, spare-parts system and other materials; Determining cost of used material according to average method; Spare-parts are allocated for twelve months. Form of accounting books: N.E.H applies General Journal accounting form and uses accounting software BPCS for accounting process. Original documents General Ledger General Journal Subsidiary accounting cards and books Financial Statement Trial balance statement BPCS software  Diagram 2.5: Accounting process BPCS software is used for all accounting parts. Some accounting parts such as materials, revenue accounting are implemented entirely on BPCS. Other accounting parts such as settlement over bank accounts, fix assets or spare-parts accounting; the accountant must input the data by hand into the BPCS. Screen 1 of BPCS software: Screen 1 After input in users’ name and password, click Ctrl, screen 2 will be displayed: Screen 2 General Journal, General Ledgers and financial statements, etc… are available in BPCS but they are rough one. At the later every month, financial statements are made on Excel and sent to N.E.J including Balance sheets, cash flow statement, statement of operations and explanation notes accompanying financial statement. All the data and those books are kept on BPCS for the accountant checking. Therefore, N.E.H accounting department just keeps documents outside; General Ledgers, General Journal and other books are kept on BPCS. Materials accounting in N.E.H: Accounts used for materials accounting: Account system of N.E.H is set up following the Decision 15/2006/QD-BTC of the Ministry of Finance including detail accounts. Each account is displayed by six numbers. Appling the periodic system for Materials, main accounts are used as: Acc 611; Acc 331. Acc 152 is used to display the amount of materials at the opening and ending of each month. Account 611 Purchase account Acc 611100 Purchase of materials Acc 611101 Purchase of materials: it is used for materials imported from companies out of Nissei group Acc 611102 Inter-company purchase of materials: it is used for materials imported from companies in Nissei group Account 331 Payable amount 3311… Domestic trade payable Acc 331101 Trade payable-Domestic (USD): it is used for recording the amount paid in USD for materials imported from domestic Acc 331102 Trade payable-Domestic (VND): it is used for recording the amount paid in VND for materials imported from domestic 3312… Oversea trade payable Acc 331200 Trade payable-Oversea: it is used for recording the amount paid for materials imported from company out of Nissei group 3313… Inter group payable Acc 331301 Inter payable-NJ: it is used for recording the amount paid for materials imported from Nissei Electric Japan Acc 331302 Inter payable-NEHK: it is used for recording the amount paid for materials imported from Nissei Electric Hong Kong Acc 331303 Inter payable-NEZS: it is used for recording the amount paid for materials imported from Nissei Electric Zhongshan Acc 331304 Inter payable-NESH: it is used for recording the amount paid for materials imported from Nissei Electric Shanghai Acc 331305 Inter payable-NEV: it is used for recording the amount paid for materials imported from Nissei Electric Vietnam Acc 331306 Inter payable-NEKS: it is used for recording the amount paid for materials imported from Nissei Electric Kunshan In there, Acc 611101 and Acc 611102 are used for recording the materials’ value imported outside and in Nissei group. Then data from these two accounts is transferred automatically to Acc 611100. Therefore, N.E.H can control the amount of materials imported from different sources. Materials are mainly imported from Nissei group. Only materials that are imported from Nissei group are reported in detail. Acc 611100 is used when accountant transfers amount of materials at the ending and beginning of month. Characteristic and management of materials in N.E.H: BPCS is used to control the operations of company and includes MRP (Materials Requirement Planning) logic to manufacturing operations, provides high standards of data validity such as engineering specifications and inventory accuracy. With this system, materials are managed very efficiently from market research stage, define quantity of required materials for production to control materials in the process of manufacture. This help company avoid bad situations such as: materials stocked in warehouse too much or lack of materials, define wrong items for production or wrong manufacturing plan… This is the materials management process of BPCS: Yes No No Yes Strategy, market, development, diversification Budget, forecasts, stock levels, customer orders Business planning Master schedule Resources OK Resources OK Available of materials and suppliers performance Movement in and out, rejects, times Quantity, date of requirement per product Production program Materials requirements Calculation of workloads Bill of materials, stocks, work in progress, lead times, handing rules Schedule, route, work stations, capacity, efficiency Monitoring of execution Release of manufacturing and PO Priority control Internal and external priorities, workshops, scheduling Measurement of performance Control General planning Execution and control Detail planning Extended MRP MRP Flowchart 2.6: Materials Requirement Planning [13] Quantity of materials purchased is calculated according to type and quantity of products in order and quantity of materials remaining in the warehouse by BPCS software, BPCS was installed coefficients to do this. This means that when BPCS receives an order from customer for a specific type of products and its quantity, it calculates the quantity of needed materials for manufacturing these products according to this formula: Quantity of materials required for order = Quantity of products in order x Coefficient - Quantity of correlative materials remaining in the warehouse Customers of N.E.H are companies in the group such as Canon and Brother Industry Companies. They often order N.E.H to produce products according to their designs and requirements. These products require specific materials that N.E.H must import from suppliers in Japan, Hong Kong and even in Vietnam. Suppliers of N.E.H often are familiar, too. In some special cases, N.E.H has to order suppliers to manufacture materials to meet the customers’ requirements. These suppliers were chosen carefully before signing long-term contracts by N.E.H and they have their own code (six figures) in BPCS of N.E.H. About the payment due date: Materials are purchased from companies in Nissei group, N.E.H pays after the Delivery date in 120 days. Materials are purchased from companies out of group, N.E.H pays at the 25th of next month. To avoid lack of materials for production, N.E.H always predict the demand of materials for the next period which helps the company determine the amount of materials need to purchase more to reserve for production as well as materials need to limit import by automatic Purchase Order (PO), PO will be explained more in later part. Price of each material types imported from familiar suppliers is fixed in advance for a period of time. Then it is input into BPCS. For each Purchase order, BPCS defines the price unit and total cost of material imported. Therefore, Purchase Dept must not input the price of that material when they entry its’ invoice. N.E.H classifies materials into three types in three accounts: Raw materials: are used directly for production; (Acc No: 152100) Materials (no item): Acc No: 153301; Sub-materials (Acc No: 153302). In N.E.H, raw materials used directly for manufacturing occupy more than 90% manufacturing cost. At the end of month, N.E.H implements stock-taking of raw materials. Materials (no item) and sub-materials are used for supporting to production. Their values are too small to call as spare-parts or tools but N.E.H always imports them in high quantity. Their values are transferred gradually into products. Therefore, N.E.H keeps these materials in Acc 153301 (Materials no item) and 153302 (Sub-Materials) with tools and spare-parts to manage and allocates their value within twelve months into products’ value. Hereinafter, thesis mentions raw materials (materials) only. All materials are kept and checked by the stockman before inputting into the warehouse. Each material has its own code which is applied consistently in Nissei group. Each code includes seven numbers. Departments use these codes to call and manage materials. Types of material are arranged according to specific shelves. Stockman keeps all data involved to materials (invoice number, Number of package, code of material, quantity and package) by BPCS, packing list is supposed to be stock card. Stockman, Production Managing Dept and Purchase Dept are in charge of managing, controlling and repairing materials in quantity. If there is any difference between invoice and practice or BPCS, Purchase Dept will check it out and repair it. All repairs must be informed to the warehouse. Accounting Dept is responsible for managing, controlling and repairing materials’ value. This will be presented in detail later. Materials used for manufacturing Antenna: It takes from ten to forty kinds of materials to produce an Antenna. In order to make a standard, all stages in the manufacturing process must be done carefully and accurately. Materials must be checked thoroughly before using. List of some materials used for manufacturing antenna: No Name Item No Model No 1 Circuit Board 3047222 ANT.p0132-pcb 2 Sheet metal 3209053 Ant.p0128-p0413-metal 3 Antenna cover 3172152 Ant.p0141-p0476-metal 4 Resin molding (ABS) 3217223 Ant.p0124-p0395-abs 5 Flour Cable 3759574 Fpo134-pcb 6 Connector 3252641 Ant.po155-po375 7 Protected tube 3001522 St.po124-po135 8 Bankin 3324842 Ant.po156-po425 9 Shrinkable tube 3001414 St.po185-po175 … … … … Materials accounting at the beginning of month: In the early month, materials accountant transfers amount of materials from Acc 152100 to Acc 611100. The result of stocktaking received from Production Managing Dept in the end of February 2008 is the based for this entry: Inventory balance in the end of Feb 2008 Inventory data Unit: USD Profit Center Type Amount Adjustment Final Total 9611 Materials 49,566 -30,360 19,206 Works in process 36,353 Finished goods 75,036 -7,339 67,697 9662 Materials 58,229 58,229 Works in process 15,985 15,985 Finished goods 43,415 43,415 … … … … … 9600 Materials 2.564.476 -2.501 2.561.975 … … … … … Total Materials 3.138.261 -1.493 3.136.768 Works in process 249.773 249.773 Finished goods 392.756 -10.023 382.733 Total Inventory 3.780.790 -11.516 3.769.274 Due to these documents, materials accountant transferred materials from Acc 152100 to Acc 611100 follow to these screen for each area of company. For instance, to transfer materials at the beginning of month for warehouse (code: 9600), accountant uses these screen: From screen 2 presented above, click Ctrl à screen 3 Screen 3 Input VKE101 to go to Accounting menu, click Ctrl à screen 4 Screen 4 This is the main screen to go to detail screens after for recording transactions or show accounting books... Transfer transaction belongs to GL Entry (Ordinary) - BTP01, so Enter 2 in “Option Number” to implement transferring entry. Click Ctrl à screen 5: Screen 5 This screen is used for recording materials transfer transaction. Acct: 1: input 152100; 2: input 611100 CENT: 9600 (code of warehouse) Amount (Net): 25,619.75 (amount of materials transferred); Item Description: Input item Des in Vietnamese (KC nguyen vat lieu dau ky) Input item Des in English (Transfer Mat begin). After that, enter F6 to end this transaction. BPCS implements this entry: Debit Acc 611100 3.136.768 Credit Acc 152100 3.136.768 Voucher (No BT0000005) is printed out. (see File Excel) Procedures for increment of materials in N.E.H Materials in N.E.H can be imported from three sources: companies in Nissei group, import from foreign companies out of group and import from Vietnam. There are a few differences between these situations. If it is imported from Vietnamese suppliers: if amount of materials imported is higher than 1 million VND, a Domestic Sales Contract must be set up and if amount of materials imported is higher than 5 million VND, they must add a “Ringisyo”, a document of the purchase which is sent to the Director and confirmed by him. If it is imported from foreign companies, there are more automatic activities by BPCS when N.E.H imports from companies in Nissei group presented more detail below. A set of documents for increment of materials for three situations include: Purchase Order; Invoice; Packing List; Attach sheet (if any); Custom declaration; Freight Invoice (by forwarder); Application for remittance by fax ... Flowchart 2.7: Procedures for increment of materials (show in next page) (see File Excel)Order from customer is input in BPCS. The accepting the Order is decided by the Director. BPCS calculates quantity of correlative materials for production; creates PO automatically. Purchase Dept will decide to cancel, delete or send this PO to suppliers. If the supplier is a company in Nissei group, it creates Invoice, Packing List and Attach Sheet in BPCS and N.E.H loads these documents from BPCS for planning out its production. Then the supplier will send original invoice to N.E.H by DHL (a quickly transportation service). If supplier is a company out of Nissei group, they send these documents by e-mail and original invoice by DHL. Purchase Dept uses these documents to input data into BPCS in this screen: Transaction Type: default USD; Employee No: input code of purchase employee; Transaction Date: automatically display today; Purchase Order No: input number of PO; Transaction quantity: input quantity of materials imported for this transaction; Order Completion Status: if suppliers delivered materials sufficiently following to PO, input ‘C’; if not, input U. One PO can have many deliveries depending on requirement of N.E.H on this PO. Warehouse: default 2; all materials import directly to warehouse. Location: 9600; Invoice No: input number of Invoice that supplier sends to N.E.H. Purchase Dept must not input price of materials imported; BPCS calculates price of each material imported follow the Invoice No. Purchase Dept send these documents to Import Dept. Import Dept uses these documents for customs procedures; N.E.H imports materials by two ways: Ship or Aircraft. N.E.H rents some companies to do these procedures and transport materials to the warehouse for N.E.H. Materials are transported directly to the warehouse. Stockman gets the packing list in BPCS from the Import Dept, prints labels and sticks them on the materials. After checking the materials in packing list and signing in it, checker transfers it to stockman. If materials are not deficient in quantity, they must feedback to Purchase Dept to require the suppliers export more; if materials’ quality is not ensured, they must feedback to Purchase Dept to return materials to suppliers. If they are correct, stockman will input Invoice No, code and quantity of each material into BPCS. Everyday at 10p.m, BPCS deals with data, records detailed and synthetic books such as: ADS_uyen.csv, Buy book, General Journal and General Ledger; vouchers are prints out for accounting Dept checks. If there is any difference between BPCS and invoice in quantity, Accounting Dept announce to Purchase Dept for repairing. If the difference is value, Accounting Dept will repair. Cost of materials stored and examples: Materials in N.E.H can be transported by ship and aircraft. Then N.E.H hires a forwarder to process custom procedures and transport materials to warehouse. If the material is transported by ship (N.E.H usually uses this way for transporting big amount of materials): the PO for these materials is often sent to supplier soon. Cost of materials imported by this way is calculated in the following formula: Cost of materials imported = CIF price at Hai Phong port + Transportation cost If the material is transported by aircraft, N.E.H usually uses this way for some special situation such as: the demand for materials is in urgent or the amount of materials is not very big, etc… Materials are transported to Hanoi more quickly but the cost of insurance and freight are higher than imported by ship. Cost of materials imported = CIF price at Noi Bai airport + Transportation cost N.E.H’s forwarders are An Loi Co.,Ltd; ASEAN Transporting Services and Trading Co.,Ltd; Dragon Logistic Co. They are in charge of completing custom procedures for materials imported and transporting the materials to N.E.H’s. As usual, at the end of month, they send a list of transports as well as fee to N.E.H in that month. After receiving this document, materials accountant confirms it and input data into BPCS. Example 1: On the 5th of March 2008, N.E.H created a PO (No: NEH-NIHK/11- 12) in BPCS in order to purchase some materials and sent it to Nissei Electric Hong Kong (N.E.H.K). N.E.H.K created an Invoice No: NIHK 38924 with a packing list in BPCS in order to deliver materials follow to PO No: NEH-NIHK11- 12. N.E.H loads them from BPCS. (This Invoice has no Attached sheet). Materials were transported by ship. After Purchase Dept inputs data into BPCS, the system deals with these data and processes these entries automatically: Dr Acc 611102 32,406 Cr Acc331302 32,406 Example 2: On Feb 2008, N.E.H created a PO in BPCS in order to purchase some materials and sent it to Nissei Electric Japan (N.E.J). N.E.H required for delivery at times in March 2008. Japan created an Invoice (No: HC - 1196A) with an Attached sheet and a packing list in BPCS in order to deliver apart of materials required follow to PO at 14/03/2008. N.E.H loads them from BPCS After Purchase Dept inputs data into BPCS, the system deals with these data and processes these entries automatically: Dr Acc 611102 51,788.38 Cr Acc 331301 51,788.38 Documents of example 1 and 2 are presented in the next page.(see File Excel) Example 3: On 11th April, N.E.H received Invoice VAT (Invoice No: 0025687) from Dragon Logistic Co for transport materials for 24 shipments of March, total cost of transport is: 100.200.000 VND. Dragon Logistic Co., Ltd Hanoi head office E-4A Thang Long Industrial Park Dong Anh District, Hanoi, Vietnam Tel: 8812488 Fax: 8812489 Code: 0100112691 Format 01- GTKT- 3L- 01 Approved by official letter No 3572 TCT/AC Invoice (VAT) Sign: AA/2007T Copy 2th : To client Invoice No: 0025687 Client’s name: Nissei Electric Hanoi Co.,Ltd Address: Lot I-3, Industrial Park, Thang Long, Dong Anh, Hanoi Code: 0101877478 Payment Method: Transfer No Goods, services Unit Quantity Unit cost Amount A B C 1 2 3=1*2 Transportation VND 24 4.175.000 100.200.000 Value of goods or services 100.200.000 VAT rate: 0% VAT amount 0 Total amount 100.200.000 In word: One hundred millions, two hundred thousands Vietnam dong. Purchaser (Signature and name) Supplier (Signature and name) Director of supplier (Signature and name) Please effect payment to our A/C No: ………………………………… Date… Month…Year… Materials accountant inputs data into BPCS follow to this entry: Dr Acc 611102 100.200.000 Cr Acc331102 100.200.000 Screens for invoice entry: From screen 4, enter 21 to “Option Number” for invoice entry; then click Ctrl à screen 6: Screen 6 Act: must default 1; Co: must default 40; Vendor: input code of Vendor for Dragon “452600”; Invoice No: must input “25687”. Then click Ctrl à screen 7: Screen 7 Posting Date: must input Y/MM/DD “8/04/11”; Invoice Date: must input (used for count payment) “8/05/25”; Amount: 100.200.000; Employee: Input employee code of Materials accountant; Currency: must default from Vendor Master; Spot rate: Must default SPOT. Then click Ctrl à screen 8: Screen 8 Payment due date: must default from Terms code; Acct: input 611102; Amount (Net): 100.200.000; Item Description: Input item Des in Vietnamese (Phi nhap khau 0803) Input item Des in English (Import fee). Then click Ctrl à screen 9: Screen 9 BPCS changes the amount in VND into USD automatically according to exchange rate of 11th Apr. On this screen, you can’t input any information. If information displayed wrongly, you must return to previous screen to re-input. But Journal No will go to next No: Ex: Voucher No will be PH 0000010 (not is PH 0000009 – its blank). Example 4: At the beginning of 2008, N.E.H signed a contract with Nippo Mechtronics Co.,Ltd (a domestic company) ordering materials Resin Molding (ABS) for Antenna production of the year 2008. A product technology design of ABS and other technical parameters are enclosed. This is the contract form of N.E.H and Nippo Co. The socialist republic of Vietnam Independent - Freedom - Happiness ---***--- Domestic Sales contract Contract No: N.E.H - HH/08 HANOI DATE: 2008/01/01 SELLER (party A)/ bên bán (bên A): Công ty TNHH Nippo. Address/ đ.c: Khu công nghiệp Nội Bài – Sóc Sơn – Hà Nội. Tel/ Điện thoại: 04-5820288 Fax: 04-5820289 Tax code/ Mã số thuế: 0500461746 Represented by/ người đại diện: Phùng Quang Thắng Position/ chức vụ: Giám đốc Acc no (VND): 43111.2.00.00.149 at BIDV – Soc Son branch - Ha Noi (số tài khoản: 43111.2.00.00.149 tại ngân hàng đầu tư và phát triển chi nhánh Sóc Sơn – Hà Nội) Acc name: Công ty TNHH Nippo Buyer (party B)/ bên mua (bên B): Nissei electric Hanoi co.,ltd Plot I-3, Thang Long Industrial Park, Dong Anh, Hanoi Tel: 84.04.955.0045 Fax: 84.04.955.0046 Tax code/ Mã số thuế: 0101877478 Represented by: SHOJI YAMAMOTO Position/ chức vụ: General Director The above parties here by agreed that seller shall sell and the Buyer shall buy the commodities with the following terms and conditions: (Hai bên cùng đồng ý tiến hành việc mua bán theo đúng các điều khoản quy định dưới đây): Item/ product (hàng hoá/ dịch vụ) Party A sells to Party B products according to invoice attached of each transaction. (Bên A bán cho bên B các loại hàng hoá theo hoá đơn đính kèm của mỗi lần giáo dịch). VAT: 0% (Thuế VAT 0%) DELIVERY (GIAO HÀNG) Delivery date shall be carried out as requested purchase order of the Party B. (Thời gian giáo hàng theo nhu cầu của bên B trong từng đợt). Quality (Chất lượng) 100% Brand new and standard packing. (Đóng mới 100% và được đóng gói theo tiêu chuẩn). Good quality is maintained delivery, when a defective is discovered the goods are returned. (Đảm bảo chất lượng tốt, nếu sau khi giáo hàng phát sinh các vấn đề về chất lượng thì hàng hoá sẽ được trả lại). PAYMENT TERMS (ĐIỀU KHOẢN THANH TOÁN) T/T remittance by every month 25th (thanh toán chuyển khoản vào 25 hàng tháng). If the amount of goods purchased is less than 3.000.000 VND by cash every Friday (nếu giá trị lô hàng được mua dưới 3.000.000 VND thì thanh toán bằng tiền mặt vào thứ 6 hàng tuần). GENERAL TERMS (ĐIỀU KHOẢN CHUNG) Any change and amendment to this contract will be writing and subject to mutual approval. This contract is effective from the date of signing and is made in two (02) copies in English. Each party shall return a copy for their use. This agreement shall be valid to December 31st 2008 (Bất cứ sự thay đổi nào trong hợp đòng này phải được thoả thuận bằng văn bản với sự đồng ý của cả 2 bên. Hợp đồng này có hiệu lực kể từ ngày ký và được chia làm 2 bản cho mỗi bên một bản. Hiệu lực của hợp đồng tính đến 31 tháng 12 năm 2008) For the buyer For the seller (Bên mua) (Bên bán) In March 2008, N.E.H sent a PO to Nippo Co.,Ltd for amount of Resin Molding (ABS). After 5 days, Nippo Co delivered materials to N.E.H with Tax Invoice (No: 0006589).  VAT invoice Format: 01 GTKT- 3LL (Copy 2th: issuing to client) Sign: AA/2007T Invoice No: 0006589 Invoice date: 27/3/2008 Seller: Nippo Co.,Ltd VAT code: 0500461746 Address: Lot 37 - Noi Bai Industrial Park AC No: 43111.2.00.00.149 Bank: BIDV – Soc Son branch Tel: 04. 5820288 Buyer: Nissei Electric Hanoi Co.Ltd VAT code: 0101877478 Address: Plot I-3, Thang Long Industrial Park, Dong Anh, Hanoi Payment terms: transfer Code Goods, services Unit Quantity Unit cost Amount A B C 1 2 3=1*2 3217223 Resin Molding PC 23.000 560 12.880.000 Value of goods or services 12.880.000 VAT rate: 0% VAT amount 0 Total amount 12.880.000 In word: Twelve million, eight hundred and eighty thousand dong. Purchaser (Signature and name) Supplier (Signature and name) Director of supplier (Signature and name) Delivery Address: Warehouse, Nissei Electric Hanoi, Lot I-3, Thang Long Industrial Park, Dong Anh, Hanoi After Purchase Dept inputs data into BPCS, the system deals with these data and processes these entries automatically: Dr Acc 611101 12.880.000 Cr Acc331102 12.880.000 Materials accounting at the end of month: N.E.H applies periodic materials system so at the end of month, they implement stocktaking for materials. N.E.H inventoried on 31st March. However, they planed for stocktaking in advance. This is the plan for stock-taking on March 2008. (see File Excel) These are documents used for crossed stocktaking and they are sent to Production Managing Dept: 1/3. Stocktaking report Quantity of remaining materials is right or wrong? There is no mistake Stocktaking is wrong Stocktaking is implemented coincidentally two times The quantity is wrong Number of random case: Source of mistake: (count wrong; some quantity of materials, had not checked, were left, etc…) Mistakes of the previous stocktaking: Mistake dues to stocktaking: Clean, tidy: (assess 5S implementation of area) Confirm the improvement of mistakes above: General assessment for this stocktaking: (tick off in one of these level) A. B. C. D. 2/3. Stocktaking assessment report Write specifically about mistakes, shortcomings and give solution for improvement in table below: General assessment: A. B. C. D. Condition of warehouse: Is there arrangement and reorganization? Are materials maintained in a clear and suitable place? Are places and spaces used suitably? Are unnecessary objects put? Condition of materials arrangement: Are similar materials arranged in the same place? Is materials arrangement suitable? Is there specific differentiation between materials inventoried and materials out of inventory? Are rejects and materials returned to suppliers put in correct place? Condition of materials preservation and management: Is “Available materials note” stuck on materials easy to understand? Are remaining materials arranged and container expressed suitably? Are materials dirty? Condition of stocktaking: Are all of materials, which are required for inventory, stuck “inventory note” on? Is the relation between “inventory notes” and materials easy to understand? In the time estimation, is stocktaking implemented fluently? Is “inventory note” written right? On the “inventory note”, stuck on materials, both person who recorded the note and counter sign or not? 3/3. Result of random stocktaking Important note for random stocktaking: Material has high value; Materials have not a regular import; To each responsible person, each maintaining area; random stocktaking must be implemented at least one material; Random stocktaking must be implemented at least 30 situations then 20 situations are recorded sufficiently into table below; Determination quantity of remaining materials has to base on counting available materials, not base on quantity of materials written on the note. Inventory Note No Materials code/ Name A Expressed quantity B Checked quantity A - B Difference Check after adjustment: check with inventory notes which were repaired after they had detected difference. If they detect mistakes at least 3 situations, they will inventory that area again (inventory scale will be discussed with responsible person). Production Managing Dept deals with the result of stocktaking, repairs it (if there are differences), inputs data into BPCS and transfers these documents to Accounting Dept. BPCS calculates the weight average price for each kind of materials used in March automatically. When receiving stock-taking result, materials accountant defines the amount of materials remaining in the warehouse and amount of materials used in March by Excel file according to this way: Amount of materials used = Amount of materials at the beginning + Amount of stored materials - Amount of materials at the ending Inventory balance in the end of Mar 2008 Inventory data Unit: USD Profit Center Type Amount Adjustment Final Total 9611 Materials 17.816 17.816 Works in process 41.184 41.184 Finished goods 53.519 53.519 9662 Materials 36.495 36.495 Works in process 26.685 26.685 Finished goods 54.348 54.348 … … … … … 9600 Materials 2.371.809 -3.539 2.368.270 … … … … … Total Materials 3.025.755 -27 3.025.782 Works in process 197.408 197.408 Finished goods 337.045 -2.514 334.531 Total Inventory 3.579.208 -21.487 3.557.721 From the Inventory balance at the ending of February 2008 and at the ending of March 2008, accountant can determines the amount of materials at the beginning and the ending of March. From internal reports, the total amount of materials in March as well as amount of materials imported for each workshop can be defined. According to these data, total amount of materials used in March is calculated by this formula: Amount of materials used = 3,136,768 + 2,871,201.39 - 3,025,782 = 2,982,187.39 Amount of materials used for each workshop such as Antenna workshop (code: 9662) in March can be defined: Dr Acc 621100 264,105 Cr Acc 611100 264,105 The entry of transferring the amount of materials at the ending of March: Dr Acc 152100 3,025,782 Cr Acc 611100 3,025,782 Some special transactions: BPCS records purchasing materials and selling goods automatically. There is usually difference between BPCS’ information and reality. To restrict this difference, N.E.H sets up all cases (if any) and solution for each case. Only raw material is recorded automatically on BPCS. The differences can be on quantity or unit price. Is its quantity, it is confirmed and repaired by Purchase Dept and Production Managing Dept. Accounting Dept confirms and repairs with unit price difference only. Accountant compares invoice with BPCS after Purchase Dept’s inputting data into BPCS. The difference between invoice and BPCS usually happens in case the materials were price installed in BPCS in advance. But this occur rarely. This is the diagram describing above processing transaction: Yes Download ADS.csv Acc or Ex Invoice Inquiry Unit price Invoice is right End Make debit note Debit Note ADS.csv AP GJ, GL Voucher Reconfirms End Defective Materials No Flowchart 2.9: Some situations creating debit note This is an example for a situation creating debit note for defective materials. Example 5: On 19th of March 200;: N.E.H received materials from Nissei Electric Hong Kong according to Invoice No: NIHK 38876. After testing materials, stockman found that some materials defected and announced to Production Managing Dept for confirming and PMD decided that materials could not be used for production. So Purchase Dept created a debit note (No DNEH08-026) for these returned materials. Amount of these materials is: 644 USD. Dr Acc 331302 644 Cr Acc 611102 644 Example 6: 15th March, Accountant confirmed invoice (No HC - 1196A) and detected a difference on unit price of Antenna cover; BPCS unit price was: 3.32 USD but invoice unit price was 3.34 USD. After having consideration, they found that the invoice price is wrong, accountant informed Purchase Dept. Purchase Dept created a Debit note (No DNEH08-025) and sent it to Nissei Japan. (in case: invoice was right, they must install correct unit price in BPCS). Basing on this debit note, accountant input data into BPCS follow the entry: Dr Acc 331301 309 Cr Acc 611102 309 Debit notes are showed in next page. (see File Excel) Materials accounting books: Detail materials accounting books: As the thesis presented above, BPCS creates accounting books automatically. To support for management, BPCS can create many kinds of accounting books, managers can see them at anytime to make decision timely. Detailed materials accounting books that BPCS creates are: General Journal; ADS.csv (this book details on each type of materials bought follow each invoice); Buy book (this book details on each invoice); Supplier book (this book shows amount of materials bought in month detail for each Supplier); etc… Synthetic materials accounting books: BPCS creates synthetic accounting books: General Ledger At the end of month, materials accountant draws AP (accounting payable) report and send it to Accountant of bank deposit and General accountant; Buy report and send it to General accountant. Financial statements: At the end of month, N.E.H draws financial statements: - Balance sheet Format B01-DN - Statement of income Format B02-DN - Statement of cash flows Format B03-DN - Explanatory notes accompanying the financial statements Format B09-DN The financial statements must be prepared at the end of each month, quarter and year (31/12). In N.E.H, the preparing of the statement complies with the decision No 15 of Ministry of Finance in March 20th 2006. N.E.H reports these statements to Nissei Electric Japan. Accountants base on detailed books and synthetic books in BPCS to create financial statements. These are the displays to extract books from BPCS: To see detailed materials accounting books, enter 801; General Journal, enter 803 to Option Number To see synthetic books: General Ledger, enter 804 to Option Number. Then click Ctrl à next screen. On this screen, you can see General Ledger of Account 611102 in March 2008. General Journal, ADS.csv; General Ledgers and AP report, Buy report are presented below. (see File Excel) CHAPTER 3 SUGGESTIONS TO IMPROVE MATERIALS ACCOUNTING IN NISSEI ELECTRIC HANOI COMPANY AND LESSONS FOR VIETNAMESE COMPANIES Suggestions to improve materials accounting in N.E.H: Opinions of materials accounting in N.E.H: Management system: At the first time visiting N.E.H, I saw this is a regular and serious prompt as well as a very out-going working environment. They have their own enterprise culture and they always remind it to all laborers in the company especially to their new employees. Working environment is professional with ISO 9001 & 14001 system. Be in the manufacturing enterprise, the communication between sections is very important. Every morning at 8a.m, all staff of departments have to listen to announcements from the GD and Managers. The GD mentions some problems related to manufacturing, revenue of an item of goods or hygiene in a section; brings out some experiences that he has been get from another company; he also congratulates for a new order for company, etc. DGD introduces visitors, engineers or trainers from other companies to all staves in N.E.H. This is also a time for a section to communicate with other sections in the company and reports news to Board of Managers. In my opinion, this action is really necessary. They just need from 5 to 10 minutes to communicate, warn as well as encourage their staves. One of the most necessary activities in N.E.H is “5S activity” in Vietnamese, they are: sạch sẽ, sẵn sàng, sáng suốt, san sẻ, sâu sát. 5S can be considered a base for production and it is indispensable to any improvement in a factory. It is not only good for keeping the working place clean, but also helps to reduce a loss by spoilage and defect. N.E.H usually controls 5S activity in sections and organizes “The 5S competition” between sections in company twice a year. Therefore, all of departments and staves try to implement these well. With N.E.H, competition between enterprises means striving for superior employees. They try to create a working environment where the employees’ individuality is respected. They offer a safe and healthy working environment and chances of learning by training both in and outside of company as well as training in Japan. Therefore, engineers and workers can update new technology for production. They also provide sufficient public welfare and the prompt salary because they would like their employees to stay long with them and they prepare the above-mentioned environment for that purpose. Accounting department has six accountants with different tasks which is correlative with accounting works. All transactions are input into system timely everyday and accountants consider data to detect mistakes and compare with involved departments; so accounting works are not accumulated into the end of month, ensure suitability between system and reality. With a good internal control system, quantity and value of materials are managed strictly and always compared between departments through BPCS software. Materials Management: Materials are encoded and managed uniformly in whole of Nissei group. Materials play an important role in products; therefore, N.E.H attaches much important to materials management. Materials are managed by many sections such as: accounting Dept, Product Management Dept, warehouse, Purchase Dept… Each section has different role in managing materials and all staves must obey correctly these rule. Every transaction involved materials is always implemented in accordance with process. This ensures logicality and suitability between system and reality; in addition, this supplies information timely to managers. However, classification of materials in N.E.H in three types: raw materials (152100), materials (no item) (153301) and sub-materials (153302) to manage is not suitable for Vietnamese Accounting Standard 02 (VAS 02). According to VAS 02: “Sub-materials are materials supporting for production process, combining with raw materials to increase quality and design of product, used to ensure that equipments run well or supporting for technical and management demand”, therefore sub-materials and materials (no item) must be managed and accounted like raw materials. BPCS software: Accounting works in N.E.H are very high every day, but they have only six accountants in accounting room. Accounting works can be fluent and efficient due to the model management system of N.E.H with BPCS software. BPCS is used to control the operations of company and is in the category of ERP (Enterprise Resource Planning) software. BPCS also includes MRP (Materials Requirement Planning) to manufacturing operations, provided high standards of data validity such as engineering specifications and inventory accuracy. ERP systems attempt to integrate several data sources and processes of an organization into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules. The two key components of an ERP system are a common database and a modular software design. A common database is the system that allows every department of a company to store and retrieve information in real-time. Using a common database allows information to be more reliable, accessible, and easily shared. Furthermore, a modular software design is a variety of programs that can be added on an individual basis to improve the efficiency of the business. This improves business by adding functionality, mixing and matching programs from different vendors and allowing the company to choose which modules to implement. These modular software designs link into the common database, so that all of the information between the departments is accessible and real-time. After researching about this system, I found out some advantages of ERP and MRP management [8],[9],[10]: ERP advantages for management functions: ERP management system provides a technology platform in which an organization can integrate and coordinate their main internal business processes. They use this to fight against the problem of the organizational inefficiency brought on by the use of different systems in every department to store information. If a large organization uses many software systems at the same time depending on the activities, most of these systems have the objective of storing and providing information about several processes that do not communicate between each other, managers could spend a lot of time collecting the information necessary to make decisions for this reason. Because when the information is not integrated, they have to check it department by department and system by system. This fragmentation of data into several separated systems can have a negative impact on the organization’s efficiency level and in commercial performance. ERP is the best alternative for solving this problem because it gets to coordinate every important system of the enterprise into a single database. It designs and automates many business processes with the sole objective of integrating the information of the whole company, avoiding complex and expensive bonds between internal systems. Frequent Mistakes with Administration Software The most frequent mistake made in small organizations is that every department has its own needs and they ask technical department to provide software capable of matching them. Sometimes this is provided from the outside through vendors and it might not even exist. If it does not exist, the organization will probably ask employees to create it. This is why it is very difficult to have fluent communication between the different systems inside an organization, even if it might seem very small. Administrative Functions of ERP This module includes several applications for administration, treasury and financial activities. The data can be made for different currencies as well. You will be able to generate reports and export them to Excel, PDF or text documents. The general accounting data can be distributed through a flexible accounts plan, which makes reporting and preparing information easier. This module also gives you the opportunity of designing different quotes and defining the organization’s assets. It contemplates different criteria for depreciation and it records data regarding purchases, sales, etc. It also includes applications for collections, payments and taxes. You can find several key processes in ERP. One of them is the fully integrated funds management and controlling that supports convenient administration functions, as well as integrated functions for planning, monitoring and controlling resources, costs and personnel. It has core application functions with access to a common database. Another one is the high performance payroll accounting function that determines the wages, salaries and pensions of workers. This solution also covers payroll lists and supplementary benefits such as seniority, sick pay, maternity benefits, vacation allowances and bonuses. Planning and management of personnel budgets is also easier by linking discrete processes for instance planning of personnel budgets, funds approval and management and continuous budget control into integrated process chains. It provides visibility for managers into allocate funds and expenditures, notifying them of the need to take action. ERP and Administration Needs Safely and securely, with proven integration ERP provides a full complement of tools designed to meet the organizations administration needs for the time being. It offers complete solutions for strategic advantage by streamlining all of your strategic activities, allowing you to simulate and analyze everything from organizational structures to compensation packages to find the most effective use of your talent and resources. The solution also streamlines payroll activities, supports regulatory and labor requirements and creates effective management strategies for the entire organization. ERP provides powerful analytic and new intelligence. Workplace performance scorecards and management by objective methods can help